Stamp duty holiday boosts mortgage lending

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The end of the stamp duty holiday in March brought the expected surge in mortgage activity, lenders have said.

The largest increase was in lending to first-time buyers, who took out 24,000 loans in March, figures from the Council of Mortgage Lenders (CML) show.

This was an increase of 74% compared to February and 57% higher than March 2011. By value, first-time buyers took out loans worth £3 billion, up 76% from the previous month and 67% from March last year.

First-time buyers accounted for 42% of total house purchase loans, the highest proportion since 2001.

The surge in first time buyers has been caused by the stamp duty holiday initiative which allowed buyers to side step a 1% tax on properties worth between £125,000 and £250,000.

And of those first-time buyers taking out a mortgage in March, 63% bought a property valued between £125,000 and £250,000 so were exempt from stamp duty.

Although the stamp duty holiday only related to first-time buyers, the tendency for property transactions to involve 'chains' resulted in knock on effects to other house purchasers also. 27,200 loans, worth £4.3 billion, were taken out by home movers in March.

"We expected this significant increase in borrowing for March because of the stamp duty holiday," CML director general Paul Smee said.

"However, if lending follows the same pattern as after previous stamp duty concessions, we will likely see a drop in activity in the next few months.

"It will take some time before we can judge whether other initiatives such as the NewBuy scheme and the reinvigorated right to buy will compensate for this effect."